The birth of British banking
BANKING IN ENGLAND - The Bank of England and associated banks
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The Bank of England
The first bank to be named after a country.
The world's first true Central Bank.
after the "Bank" of Rome
The birth of British banking
In the 1660s London dominated England’s political and economic life and, with a population of 450,000, was the fourth largest city in the world. The established importance of London in raising and servicing government finance and in international trade had led to the development of a relatively sophisticated money market. It was consequently here that the profession of banking emerged from the trade of goldsmithing and usury during the course of the seventeenth century.
By 1677 there were forty-four goldsmith bankers in London. Such goldsmith bankers were known by contemporaries as 'keepers of running cashes' as they accepted money for safe custody and gave in exchange a receipt. This receipt, initially used to reclaim the full sum lodged with the goldsmith, soon came to be presentable for part payment and assignable - the antecedent of the modern banknote. Clients could also withdraw money by writing a note requesting a sum to be paid to a third party - the forerunner of the modern cheque. In this way British banking was born.
"(Act relating to Usury.) Another bill was brought in against usury, which passed both houses, and was made a statute. By it, an act passed in the 37th of the late king (Henry VIII), that none might take above 20 per cent. on money lent, was repealed; which they said was not intended for the allowing of Usury, but for preventing farther inconveniences. And since Usury was by the word of God forbidden, and set out in divers places of Scripture as a most odious and detestable vice, which yet many continue to practise, for the filthy gain they make by it; therefore, from the 1st of May, all usury or gain from money lent was to cease; and whosoever continued to practise to the contrary, was to forfeit both principal and interest, to suffer imprisonment, and to be fined at the king's pleasure." ( Cobbett's Parliamentary History of England , vol. I, p.596).
This opened the door to the establishing of the Bank of England in 1694. The Bank of England was incorporated on July 27, 1694, as a private joint-stock association, with a capital of £1.2 million. In return for the loan of its entire capital to the government it received the right to issue notes and a monopoly on corporate banking in England. Of course they only lent the principal so the interest would keep accumulating by compound interest. Since the loans could NEVER be repayed the moneylenders had complete control of the government and people. This led to an explosion of other banks in England.